GBP/USD slide a likely precursor to further breakdown
James Chen, CMT June 20, 2017 3:24 PM
Carney’s comments brushing off speculation over a BoE rate hike on the horizon dealt the British pound a rather significant blow. The currency dropped sharply on Tuesday against the US dollar, euro, and Japanese yen. Against the dollar, the pound hit a new two-month low after Carney’s speech, extending the recent breakdown that was initiated less than two weeks ago, when Theresa May made an unexpectedly poor showing in the UK general election.
Carney’s rejection of the rate hike speculation sharpened the contrast between the still-divergent monetary policies of the UK and US. As Carney sounded a very dovish tone on Tuesday, the US dollar continued to be buoyed by the sustained hawkishness of the US Federal Reserve and recent Fed speakers despite signs of declining US inflation. For the past two weeks, the dollar has been in a significant relief rebound at the same time that the pound has been weighed down by election and Brexit concerns.
The resulting GBP/USD slide first broke down (immediately after the UK election outcome) below a key uptrend support line extending back to the mid-March low. After that initial breakdown, the currency pair rebounded but remained pressured under the major 1.2800 resistance level. On Tuesday after Carney’s speech, GBP/USD hit a low right around the key 1.2600 support handle, an original downside target. With any further breakdown below 1.2600, the next major downside target is around the 1.2350 support level.
Disclaimer: The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex and commodity futures, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to Forex.com or GAIN Capital refer to GAIN Capital Holdings Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.